Union Finance Minister Nirmala Sitharaman presented her eighth consecutive Union Budget on Saturday highlighting measures aimed at economic growth, infrastructure development, and tax reforms. However, the budget has also drawn criticism for its perceived regional biases and lack of adequate support for non-BJP-ruled states.
Healthcare and education:
- Allocation of ₹98,311 crore for healthcare, focusing on medical research and AI-based healthcare solutions.
- Increased medical course seats by 10,000 for the upcoming year, with a plan to add 75,000 seats over the next five years.
- ₹1.29 lakh crore earmarked for education, emphasizing digital learning and skill development programs.
Infrastructure and state support:
- ₹12 lakh crore allocated for infrastructure development, including roads, highways, railways, and airports.
- Interest-free loans to state governments for 50 years to support capital expenditure.
Agriculture and rural development:
- ₹1.71 lakh crore for agriculture and allied activities, with an increased Minimum Support Price (MSP) for key crops.
- The Jal Jeevan Mission extended to 2028.
- A new rural employment scheme targeting the creation of 1 crore jobs over the next two years.
Social welfare and women empowerment:
- A ₹5 lakh financial assistance program for SC/ST women entrepreneurs.
- ₹50,000 crore allocated for women entrepreneurship skill training and financial assistance.
Environmental sustainability and digital innovation:
- ₹1,500 crore allocated for renewable energy projects, focusing on solar, wind, and green hydrogen.
- ₹500 crore for AI research and digital infrastructure development.
Taxation updates:
- The income tax cap under the new tax regime was increased to ₹12 lakh.
- For incomes up to ₹12.75 lakh for salaried taxpayers with a basic deduction of ₹75,000, the new tax regime gives 0% income tax.
- New tax slabs have been introduced to encourage increased household consumption, savings, and investment.
- The time to file tax returns was extended to four years.
- Rationalization of tax deduction at source (TDS) rates and thresholds.
Where the money comes from
According to the Union Budget 2025-26 documents, for every rupee in the government coffer, the biggest pie of 66 paise will come from direct and indirect taxes. Around 24 paise will come from borrowings and other liabilities, 9 paise from non-tax revenue like disinvestment, and 1 paise from non-debt capital receipts.
Direct taxes, including corporate and individual income tax, will contribute around 39 paise, while income tax will yield 22 paise, and corporate tax will account for 17 paise. Among indirect taxes, goods and services tax (GST) will contribute the maximum 18 paise in every rupee of revenue. Additionally, the government is looking to earn 5 paise out of every rupee from excise duty and 4 paise from customs levy.
Where the money goes
On the expenditure side, the outlay for interest payments and states’ share of taxes and duties, respectively, stood at 20 paise and 22 paise for every rupee. Allocation for defence stands at 8 paise per rupee. Expenditure on central sector schemes will be 16 paise out of every rupee, while the allocation for centrally-sponsored schemes is 8 paise. The expenditure on ‘Finance Commission and other transfers’ is pegged at 8 paise. Subsidies and pension will account for 6 paise and 4 paise, respectively. The government will spend 8 paise out of every rupee on ‘other expenditures.’
Regional highlights and criticisms
Bihar emerged as a major beneficiary in the Union budget, with a slew of announcements including:
- A National Institute of Food Technology.
- Revamp of Patna airport and the development of a greenfield airport.
- Establishment of a food hub and the creation of a Makhana Board.
This focus on Bihar sparked criticism from opposition parties, who dubbed it the “Bihar Budget,” alleging that the allocations were aimed at wooing voters ahead of the state’s assembly elections. Congress MP Shashi Tharoor remarked that “the focus on Bihar in this budget is obviously due to the upcoming Bihar elections.” He criticized the government for using each election year to announce more freebies.
Kerala, which had expected a special package for the Wayanad landslide recovery, found no mention of the same in the Union budget. This led to further accusations from non-BJP-ruled states of receiving inadequate attention and funds.
Neglect of non-BJP-ruled states
States ruled by opposition parties expressed disappointment over the Union budget. Kerala, which was anticipating a special package to address the aftermath of the Wayanad landslide, found no mention of such assistance.
Opposition leader Rahul Gandhi criticized the Union budget, calling it “a band-aid for bullet wounds,” adding, “Amid global uncertainty, solving our economic crisis demanded a paradigm shift. But this government is bankrupt of ideas.”
Chandrashekhar Azad Ravan, MP and leader of the Bhim Army, echoed these concerns, calling the budget “anti-social justice” and “anti-economic equality.” He said, “There has been a marginal increase in the amount allocated for Dalits, Adivasis, backward classes, Muslims, and other religious minorities, women, poor, laborers, and farmers, while the inflation rate is more than 6%. This means that for the majority of the deprived section of the country, the income is 8 paise and the expenditure is more than 100 rupees, and there is nothing in this budget.”
He further criticized the inadequate funding for essential sectors such as education, health, employment, and social security, asserting that the government had “distributed freebies to a few ‘friendly’ industrialists” while leaving marginalized communities “empty-handed.”
Congress MP Shashi Tharoor commented on the budget’s regional focus, stating, “The focus on Bihar in this budget is obviously due to the upcoming Bihar elections. It’s ironic that the party that wants One Nation, One Election is actually using each election, each year, to give people more freebies.”
Congress President Mallikarjun Kharge remarked, “The whole country is struggling with the problem of inflation and unemployment, but the Modi government is bent on garnering false praises.” He criticized the government for failing to double farmers’ income or provide a roadmap for health, education, or scholarships for marginalized children.
Delhi Chief Minister Arvind Kejriwal expressed disappointment, pointing out the absence of a loan waiver for farmers despite significant government expenditure on waiving loans for large corporations.
The CPIM accused the government of underdelivering, stating that there was a gap of one lakh crore between the promised expenditure of Rs 48.2 lakh crores and the actual spending of Rs 47.16 lakh crores. They described the budget as “By the Rich for the Rich,” citing increased privatization and liberalization of critical sectors.
Cost changes for everyday items
The budget’s impact on consumer prices was evident as Sitharaman announced changes in tariffs:
- Price decreases: Cancer drugs, critical minerals, fish, leather, phone chargers, telecom equipment, EV batteries, electronic toys, jewelry, some imported cars, motorcycles, and vans.
- Price increases: TVs, smart meters, footwear, candles, tapers, and solar cells.
Political reactions
In her budget statement, Nirmala Sitharaman declared that under the new tax regime, those earning up to ₹12 lakh would not be obliged to pay taxes. She emphasized that the government aims to stimulate increased household consumption, savings, and investment through these tax revisions.
Former Finance Minister P. Chidambaram criticized the budget for lacking relief for the middle class and job creation measures. Congress leader Rahul Gandhi described it as “pro-corporate” and “a band-aid for bullet wounds.” Congress President Mallikarjun Kharge pointed out that despite collecting over ₹54.18 lakh crore from the middle class in the past decade, the government was now offering a limited tax exemption.
Kharge added, “The whole country is struggling with inflation and unemployment, but the Modi government is bent on garnering false praises. No roadmap for doubling farmers’ income, no concessions on agricultural inputs, and no comprehensive plan for education or health care.” He criticized the budget as merely “announcement-making” with no concrete steps for job creation.
Arvind Kejriwal expressed disappointment that farmers’ loan waivers were ignored, while the CPIM described the budget as “By the Rich for the Rich,” citing increased privatization and inadequate government spending.
Fiscal deficit
On fiscal consolidation, the fiscal deficit for FY25 has been pegged at 4.8% of GDP and at 4.4% for FY26. Fiscal deficit is the difference between the government’s expenditure and its income.
Capital expenditure
Capital expenditure or capex for FY26 is estimated to be ₹15.48 lakh crores, which is at 4.3% of the GDP. The estimate for FY25 is revised to ₹13.18 lakh crores (from ₹15 lakh crores), which is at 4.1% of the GDP.
Tax receipts
Tax receipts are estimated to increase to 12% of the GDP for FY26, as compared to the revised estimate of 11.8% of GDP during FY25. The share of direct tax receipts is estimated to be around 59% of the total tax receipts, which consolidates at 7.1% of GDP, while indirect tax is the remaining share, which amounts to 4.9% of GDP.
Allocation to major ministries
Defence was allocated over ₹6.8 lakh crores in the Budget, followed by Road Transport, Highways, and Railways. In last year’s interim budget, the Defence Ministry was allocated ₹6.2 lakh crores.
Transfers to states and union territories
Around ₹25.6 lakh crore was budgeted as transfers to States and Union Territories. Of this, ₹14.2 lakh crore came from the devolution of State’s share in taxes. Another ₹1.32 lakh crore came from Finance Commission grants. Scheme-related and other transfers amounted to ₹10.05 lakh crores.
